Demand and Supply

Question 1

States that the lower the price of a good, the larger the number of consumers. All other things held constant.

Answer 1

Law of Demand

Question 2

There is a negative relationship between quantity demanded and price.

Answer 2

Law of Demand

Question 3

Determinants of Demand

Answer 3

1. Prices of good or service
2. Consumers’ income
3. Prices of related goods and services
4. Consumers’ preferences
5. Expected price of the product in future periods
6. Number of consumers in the market

Question 4

Determinants of Supply

Answer 4

1. Prices of the good
2. Prices of inputs used to produce the good
3. Prices of goods related in production
4. Level of available technology
5. Expectations of the producers concerning future price of the good
6. Number of firms or the amount of productive capacity in the industry

Question 5

Consumers are willing and able to buy more goods if the prices are lower.

Answer 5

Price of good or service

Question 6

An increase in income causes consumers to demand more of a good, all other variables are constant

Answer 6

Normal Good

Question 7

Other goods and services consumed less if there is an increase in income.

Answer 7

Inferior Goods

Question 8

An increase in income can cause the amount of commodities that consumers purchase to either increase or decrease.

Answer 8

Consumers’ income

Question 9

If one (1) good can be used in the place of another.

Answer 9

Substitutes

Question 10

Goods that are used together.

Answer 10

Complements

Question 11

If there are two substitutes, an increase in the price of one good will increase the demand for the other good.

Answer 11

Prices of related goods and services

Question 12

If the price of a good increases, the demand for the other good decreases.

Answer 12

Prices of related goods and services

Question 13

Demand will increases as consumers see it as having higher quality, more fashionable, healthier, or more desirable in any way.

Answer 13

Consumer’s preferences

Question 14

Demand will decrease when consumers perceive falling quality, displeasing appearance, or unhealthiness.

Answer 14

Consumer’s preferences

Question 15

If consumers expect the price to be higher for a future period, demand will probably rise in the current period.

Answer 15

Expected price of the product in future periods

Question 16

If consumers expect the price to decline for a future period, demand for the current period will fall.

Answer 16

Expected price of the product in future periods

Question 17

Increase in the number of consumers will increase the demand.

Answer 17

Number of consumers in the market

Question 18

Decrease in the number of consumers will decrease the demand.

Answer 18

Number of consumers in the market

Question 19

What causes the entire demand curve to shift to a new location?

Answer 19

When any one of the five (5) determinants, other than price, changes value.

Question 20

States that all things are equal, an increase in price results in an increase in quantity supplied.

Answer 20

Law of Supply

Question 21

The higher the price of the product, the greater the quantity produced. All other things are equal.

Answer 21

The price of the good

Question 22

The lower the price of the product, the smaller the quantity produced. All other things are equal.

Answer 22

The price of the good

Question 23

Increase in the price of one or more of the inputs will increase the cost of production. If the cost rises, it becomes less profitable and will produce smaller quantity.

Answer 23

The prices of inputs used to produce the good

Question 24

An increase in the good X relative to good Y causes an increase in production of good X and decrease production of good Y.

Answer 24

Substitutes

Question 25

An increase in the price of good X causes producers to supply more of good Y.

Answer 25

Complements

Question 26

State of knowledge concerning how to combine resources to produce goods and services.

Answer 26

Technology

Question 27

If producers expect the price to rise in the future, they will withhold some goods resulting to a reduction in supply in the current period.

Answer 27

The expectations of the producers concerning the future price of the good

Question 28

Number of firms or productive capacity increases, more supplies

Answer 28

The number of firms or the amount of productive capacity in the industry

Question 29

States that a low supply and high demand increases price while a high supply and low demand tends to make prices fall.

Answer 29

Law of Supply and Demand

Question 30

Happens when producers supply more of a product at a given price than buyers demand.

Answer 30

Surplus

Question 31

Happens when buyers demand more of a product at a given price than producers are willing to supply.

Answer 31

Shortage

Question 32

Maximum amount the government permits sellers to charge for a good.

Answer 32

Ceiling Price

Question 33

What occurs when the ceiling price is below equilibrium?

Answer 33

Shortage

Question 34

Minimum amount the government permits sellers to charge for a good.

Answer 34

Floor Price

Question 35

What occurs when the floor price is above equilibrium?

Answer 35

Surplus